GALILEI CO.LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥68.00B
• Operating Income: ¥8.03B
• Net Income: ¥5.80B
• EPS: ¥144.05

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Full Year Forecast

Disclaimer

This data was automatically extracted from XBRL files. Please refer to the original disclosure documents for accuracy.

AI Financial Analysis

Executive Summary

Verdict: A solid FY2026 Q2 with double-digit top-line and operating profit growth, modest margin expansion, and clean cash conversion, underpinned by an exceptionally strong balance sheet. Revenue rose 11.5% YoY to 680.03, while operating income increased 15.0% YoY to 80.25, outpacing sales. Net income grew 11.7% YoY to 57.71, keeping pace with the top line. Using the implied prior period, operating margin expanded from roughly 11.45% to 11.80%, a 35 bps improvement. Net margin edged up from about 8.47% to 8.49%, a 2 bps gain, reflecting disciplined below-the-line items and a 31.3% effective tax rate. Gross margin printed at 27.9% (prior not disclosed), indicating healthy pricing and/or mix despite cost pressures. Ordinary income reached 84.10 (+18.5% YoY), with non-operating income of 4.91 (dividends 1.00, interest income 0.55), providing a mild tailwind. Cash generation was solid: operating CF of 58.25 nearly matched net income (OCF/NI = 1.01x), signaling good earnings quality. That said, heavier capex of 68.82 led to slightly negative estimated FCF (~-10.6), likely timing-related rather than structural given the strong cash position. Liquidity is a standout: current ratio 258%, quick ratio 247%, and cash/deposits of 493.35, with low leverage (D/E ≈ 0.38x based on total liabilities). Equity accounts for roughly 72.7% of assets, pointing to conservative solvency. ROE is 5.5% via DuPont (NPM 8.5% × AT 0.467 × FL 1.38x), with ROIC at 9.8% indicating efficient capital deployment above typical 7–8% benchmarks. Comprehensive income (54.30) trailed net income, implying negative OCI (likely valuation losses on securities), a manageable factor given the scale of cash and equity. No signs of earnings quality red flags (no OCF shortfall versus NI), and working capital appears well controlled. Near term, the key watchpoints are sustaining operating margin gains, normalizing capex/FCF, and any OCI volatility from investment securities. Overall, the quarter supports a constructive medium-term outlook, with robust liquidity and moderate operating leverage providing resilience.

Profitability Analysis

ROE decomposition (DuPont): ROE 5.5% = Net profit margin 8.5% × Asset turnover 0.467 × Financial leverage 1.38x. The most notable change YoY appears to be modest margin improvement: operating margin rose about 35 bps to 11.80%, while net margin ticked up ~2 bps to 8.49%. Business driver: better operating leverage with revenue growth outpacing operating cost growth, and a benign non-operating line (dividends/interest income) supporting ordinary income. Financial leverage remained conservative at ~1.38x (assets/equity ≈ 1455.42/1057.73), so leverage did not drive ROE. Sustainability: the margin uplift looks repeatable if pricing and mix remain favorable and SG&A discipline is maintained; however, absent detail on SG&A components and cost inputs, we treat the improvement as cautiously sustainable rather than clearly structural. Concerning trends: none apparent; however, we cannot verify whether SG&A grew faster than revenue due to lack of SG&A YoY disclosure. Operating margin quality is supported by a clean gap between operating and ordinary income (limited reliance on non-operating gains), and depreciation is modest (8.12) relative to EBITDA (88.37), indicating healthy core returns.

Growth Assessment

Revenue growth of 11.5% YoY to 680.03 reflects robust demand and/or improved pricing in core refrigeration/display equipment markets. Operating income growth of 15.0% outpaced sales, indicating positive operating leverage. Ordinary income (+18.5%) benefitted from non-operating income (4.91), but profit remains primarily operating-driven, which is higher quality. Net income growth of 11.7% aligned with topline momentum, with the tax rate at 31.3% not creating undue volatility. Margin expansion was modest but positive at both operating (+35 bps) and net levels (+~2 bps). ROIC at 9.8% suggests value-accretive growth above typical cost of capital. Profit quality appears high: OCF/NI ≈ 1.01x and EBITDA margin at 13.0% indicate healthy cash-generative operations. Outlook hinges on sustaining order intake and price/mix, as well as managing input costs (steel, compressors, electronics) and energy-efficiency specification trends in retail/food service. We note a slight drag from negative OCI this quarter; however, core operations and cash generation remain intact. Absent segment disclosures, growth breadth (domestic vs overseas; product mix) cannot be confirmed.

Financial Health

Liquidity is very strong: current ratio 258.3% and quick ratio 247.0% (cash 493.35 and AR 225.00 comfortably cover current liabilities of 357.34). No warning triggers: Current Ratio >> 1.0 and D/E well below 2.0. Solvency is conservative with total liabilities/equity ≈ 0.38x and an equity ratio (calculated) of ~72.7% (1057.73/1455.42). Maturity mismatch risk is low: cash plus near-term receivables exceed current liabilities by a wide margin; accounts payable (222.97) are well covered by cash/AR. Interest-bearing debt breakdown is unreported, and interest coverage cannot be calculated; however, non-operating expenses are small (1.05), and operating income is ample, suggesting no near-term debt service stress. Off-balance sheet obligations are not disclosed; no specific guarantees/commitments were provided in the data. Overall, the balance sheet provides substantial shock absorption capacity.

Cash Flow Quality

OCF of 58.25 is roughly equal to net income of 57.71 (OCF/NI = 1.01x), indicating high-quality earnings with limited accrual strain. Working capital appears well managed given the strong cash position and no signs of receivable/inventory build pressuring OCF (inventory 40.52 is modest versus payables 222.97). Estimated free cash flow is slightly negative at about -10.6 (OCF 58.25 minus capex 68.82), likely timing-related given capex intensity this period. With cash/deposits of 493.35, capex is comfortably fundable without leverage. No signs of working capital manipulation are evident in the limited data (no unusual divergence between NI and OCF). Financing CF was -29.71, suggesting distributions or debt reduction; details on dividends/repurchases are not disclosed.

Dividend Sustainability

The calculated payout ratio is 56.6%, within the generally sustainable <60% benchmark. On a cash basis, half-year FCF was slightly negative due to elevated capex; however, the sizable cash reserves (493.35) and conservative leverage provide ample coverage for dividends in the near term. Absent explicit DPS and total dividends paid, FCF coverage cannot be precisely measured, but OCF nearly covered NI, supporting the sustainability of earnings-based payouts. Policy outlook: the conservative balance sheet and ROIC of 9.8% support continued shareholder returns, though capex timing could temporarily tighten FCF coverage intra-year. We will watch for normalization of capex and full-year cash conversion before upgrading confidence in FCF-backed dividends.

Risk Assessment

Business Risks:

• Input cost volatility (steel, compressors, electronic components) potentially pressuring gross margins.
• Customer concentration in retail/foodservice refrigeration leading to cyclical capex timing risk.
• Regulatory/standards changes (energy efficiency, refrigerants) requiring sustained R&D and capex.
• Project execution and installation scheduling risks affecting revenue recognition and margins.

Financial Risks:

• Negative comprehensive income this period indicates OCI volatility (investment securities valuation).
• Limited visibility on interest-bearing debt and interest coverage due to unreported items.
• FCF sensitivity to capex timing; temporary FCF deficits possible despite solid OCF.

Key Concerns:

• Slightly negative estimated FCF in the half due to capex ramp.
• Dependence on non-operating income is low but present; dividend/interest income could fluctuate with markets.
• Data gaps (SG&A breakdown, debt schedule, DPS) limit detailed assessment of recurring cost structure and capital allocation.

Investment Implications

Key Takeaways:

• Double-digit revenue (+11.5%) and operating profit (+15.0%) growth with ~35 bps operating margin expansion to 11.8%.
• High earnings quality: OCF/NI ≈ 1.01x and EBITDA margin 13.0%.
• Exceptionally strong balance sheet: equity ratio ~72.7%, current ratio 258%, low leverage (Liabilities/Equity ≈ 0.38x).
• ROIC at 9.8% indicates efficient capital deployment above typical 7–8% benchmarks.
• Slightly negative estimated FCF (-~10.6) driven by elevated capex; ample cash provides flexibility.
• Comprehensive income below net income due to OCI losses; manageable but a source of quarterly volatility.

Metrics to Watch:

• Order intake/backlog and pricing to gauge sustainability of revenue growth and margin.
• Gross margin trajectory versus input cost trends (steel, components) and FX.
• Capex cadence and FCF normalization in 2H.
• SG&A growth versus revenue (operating leverage) once disclosed.
• OCI movements tied to investment securities and interest/dividend income stability.

Relative Positioning: Within Japanese industrial refrigeration/display peers, the company exhibits above-average balance sheet strength, solid double-digit operating margin, and ROIC near 10%, positioning it as a financially conservative, cash-rich operator with moderate but improving operating leverage.

Disclaimer

This analysis was auto-generated by AI. Please note the following:

• No Guarantee of Accuracy: The accuracy and completeness of this analysis are not guaranteed. For accurate financial data, please refer to the original disclosure documents published on TDnet or other official sources
• Not Investment Advice: This analysis is for general informational purposes only and does not constitute investment advice under applicable securities laws. It is not a recommendation to buy or sell any specific securities
• At Your Own Risk: Investment decisions should be made at your own discretion and risk. We assume no liability for any losses incurred based on this analysis